Financial Management and Accounting Assignment Example | Topics and Well Written Essays - 500 words

Financial Management and Accounting - Assignment Example revenues, and expenses attributable to a business that would eventually lead to either a surplus or deficit in the case of a not for profit business. The total profit margin should be used as a metric that is helpful in the assessment of the financial strength of a company. The strength of a company in terms of finances is determined by analyzing the percentage of money that remains after total expenses are deducted form the income of a company. The total profit margin is calculated using the following formula; In a business, there are 2 forms of cash flows; cash inflow, and cash out flow. Cash inflow to a business is the revenue that may is incurred from the normal running of the business. The other forms of cash inflows include dividends that a company receives from investing in other businesses. Cash out flows are the cash amounts that a business uses in the running of the business. They may include the payment of business expenses, acquisition of equipment, and the payment of dividends to shareholders of the business. The cash flow to Brandywine Homecare is $12 million that results from the revenue of the business. The doubling of the depreciation charge as a result of changes in calculation procedures would make it to be equivalent to $3 million. The increase in depreciation charge would make the net income to be less by an amount equivalent to the increase in the depreciation charge. However, the increase in the value of the depreciation charge would not affect the cash flow of the company. This is because depreciation charge is termed as a non cash item and therefore has no effect on the cash flows of the business. If the depreciation expense was reduced by a half, the net profit would increase by an amount equal to the decrease. That means that the depreciation charge would be equal to $0.75 million. The total profit margin would reduce by a half while the cash flow would remain